The Rise and Fall of Income Inequality in Mexico: 1989-2010

Inequality in Mexico rose between 1989 and 1994 and declined between 1994 and 2010. We examine the role of market forces (demand and supply of labour by skill), institutional factors (minimum wages and unionization rate), and public policy (cash transfers) in explaining changes in inequality. We apply the ‘re-centered influence function’ method to decompose changes in hourly wages into characteristics and returns. The main driver is changes in returns. Returns rose (1989-1994) due to institutional factors and labor demand. Returns declined (1994-2006) due to changes in supply and --to a lesser extent--in demand; institutional factors were not relevant. Government transfers contributed to the decline in inequality, especially after 2000.inequality, wages, disposable income, labor markets, Mexico

Teenage Pregnancy in Mexico: Evolution and Consequences

We analyze the consequences of a teenage pregnancy event in the short- and long-run in Mexico. Using longitudinal and cross-section data, we match females who got pregnant and those that did not based on a propensity score. Several balancing tests and specifications indicate that the main assumptions to estimate the average treatment effect on the treated using a propensity score are satisfied. In the short-run, we find that a teenage pregnancy causes a decrease of 0.6-0.8 years of schooling, lower attendance to school, less hours of work and a higher marriage rate. At the household level, we do not find any effect in parental hours of work or income per capita. In the long-run, we find a loss in years of education of 1-1.2 and a higher probability of being married, but also higher probability of being separated or divorced. We also find that household income per capita is lower at least in the long-run.teenage, pregnancy, labor outcomes, propensity score, matching

The Role of Emotions on Risk Aversion: A prospect theory experiment

This study measures risk and loss aversion using Prospect Theory and the impact of emotions on those parameters. Our controlled experiment at two universities in Mexico City, using uncompensated students as research subjects, found results similar to those obtained by Tanaka et al. (2010). In order to study the role of emotions, we provided subjects with randomly varied information on rising deaths due to drug violence in Mexico and also on youth unemployment. In agreement with previous studies, we find that risk aversion on the gains domain decreases with age and income. We also find that loss aversion decreases with income and is less for students in public universities. With regard to emotions, risk aversion increases with sadness and loss aversion is negatively influenced by anger. On the loss domain, anger dominates sadness. On average, anger reduces loss aversion by half

The Role of Emotions on Risk Aversion: A prospect theory experiment

This study measures risk and loss aversion using Prospect Theory and the impact of emotions on those parameters. Our controlled experiment at two universities in Mexico City, using uncompensated students as research subjects, found results similar to those obtained by Tanaka et al. (2010). In order to study the role of emotions, we provided subjects with randomly varied information on rising deaths due to drug violence in Mexico and also on youth unemployment. In agreement with previous studies, we find that risk aversion on the gains domain decreases with age and income. We also find that loss aversion decreases with income and is less for students in public universities. With regard to emotions, risk aversion increases with sadness and loss aversion is negatively influenced by anger. On the loss domain, anger dominates sadness. On average, anger reduces loss aversion by half

Female Labour Supply and intergenerational preference formation: Evidence for Mexico

Using a national representative sample for Mexico, we analyse the effect of a husband having a working mother on the probability that he has a working wife. Our results show that labour force participation by a husband’s mother increases the probability of the labour force participation of his wife by 15 percentage points. The effect is mainly driven by males with less than a high school education. One possible confounding factor is the effect of labour force participation of the wife’s mother on the wife’s labour participation decision. However, in a different sample, we do not find any effect of work force participation of wives’ mothers on wives’ decisions to join the labour force. Finally, we test the effect of the work force participation of a husband’s mother on the husband’s preferences regarding child-rearing practices. We find that having a working mother strongly reduces the probability that daughters will be tasked to care for siblings and fosters preferences for a more egalitarian allocation of educational resources among children. Hence, promoting female labour force participation can have important dynamic implications, especially for developing countries

Female Labour Supply and intergenerational preference formation: Evidence for Mexico

Using a national representative sample for Mexico, we analyse the effect of a husband having a working mother on the probability that he has a working wife. Our results show that labour force participation by a husband’s mother increases the probability of the labour force participation of his wife by 15 percentage points. The effect is mainly driven by males with less than a high school education. One possible confounding factor is the effect of labour force participation of the wife’s mother on the wife’s labour participation decision. However, in a different sample, we do not find any effect of work force participation of wives’ mothers on wives’ decisions to join the labour force. Finally, we test the effect of the work force participation of a husband’s mother on the husband’s preferences regarding child-rearing practices. We find that having a working mother strongly reduces the probability that daughters will be tasked to care for siblings and fosters preferences for a more egalitarian allocation of educational resources among children. Hence, promoting female labour force participation can have important dynamic implications, especially for developing countries

Reducción de los salarios de los trabajadores con educación universitaria en México: ¿son los más jóvenes o los más viejos los más perjudicados?

A reduction in the wage premium for skilled labor –and a consistent reduction of overall wage inequality-has played an important role in explaining the fall of income inequality in Latin America during the 2000-2014 period. Consistent with that pattern, wage inequality declined in Mexico since 2000. This paper investigates the possible channels on why the wages of high-skilled workers have declined. Using data from Mexican labor surveys for the period between 2000 and 2014, we investigate if the decline was driven by wages declining more sharply for younger or older workers. We find that wages of older workers declined and the decline was more pronounced the older the cohort. This would seem to support the hypothesis that older workers’ skills became obsoleteUna reducción en la prima salarial del trabajo calificado -y una reducción constante de la desigualdad salarial global- ha jugado un papel importante en la explicación de la caída de la desigualdad del ingreso en América Latina durante el período 2000-2014. En consonancia con ese patrón, la desigualdad salarial disminuyó en México desde el año 2000. Este trabajo investiga las posibles causas de por qué los salarios de los trabajadores altamente cualificados han disminuido. Utilizando datos de encuestas sobre el trabajo de México para el periodo 2000- 2014, se investiga si la reducción se debió a una disminución de salarios más acusada para los trabajadores más jóvenes o más viejos. Nos encontramos con que los salarios de los trabajadores de edad se redujeron y el descenso fue más pronunciado cuanto mayor es la cohorte. Esto parece apoyar la hipótesis de que las cualificaciones de los trabajadores de más edad se volvieron obsoleta

Growth is (really) good for the (really) rich

This paper analyzes the relationship between mean income and the income of the rich. Our methodology closely follows that of Dollar and Kraay (2002), but instead of looking at the bottom of the distribution, we analyze the top. We use panel data from the World Top Incomes database, which collects top income data from several countries using tax returns as the raw source. We define the “rich” as earners in the top 10 percent, 1 percent, 0.1 percent, and 0.01 percent of the income distribution. We find that economic growth is good for the rich in the sense that the mean income of the top decile of the distribution grows in the same proportion as that of the whole population. However, we also find that the income of earners in the top percentile of the distribution and above grows in an even larger proportion than average income: that is, economic growth is really good for the really rich. We also find that during economic downturns, the average income of top earners responds proportionally less to changes in mean income than during economic expansions. Our results are robust to different sample specifications

Growth is (really) good for the (really) rich

This paper analyzes the relationship between mean income and the income of the rich. Our methodology closely follows that of Dollar and Kraay (2002), but instead of looking at the bottom of the distribution, we analyze the top. We use panel data from the World Top Incomes database, which collects top income data from several countries using tax returns as the raw source. We define the “rich” as earners in the top 10 percent, 1 percent, 0.1 percent, and 0.01 percent of the income distribution. We find that economic growth is good for the rich in the sense that the mean income of the top decile of the distribution grows in the same proportion as that of the whole population. However, we also find that the income of earners in the top percentile of the distribution and above grows in an even larger proportion than average income: that is, economic growth is really good for the really rich. We also find that during economic downturns, the average income of top earners responds proportionally less to changes in mean income than during economic expansions. Our results are robust to different sample specifications